The False Premise of Retirement Planning

Written on:August 29, 2014
Comments
Add One

The financial media is replete with articles about why more Americans are failing to accumulate enough wealth for retirement.  There are many seemingly viable answers, but the problem is that they all come from the perspective of financial planners, investment counselors and corporate human resources departments.

The corporatist state?

The corporatist state?

These people have a vested interest in managing this critical conversation to benefit their own products, job security and their corporate sponsors.  Part of this is that these corporate vested interests want to keep their employees disengaged from the political process and deprive them of their own empowerment to radically change their own circumstances for the better, devoid of the standard and ineffective advice from financial planning professionals.

But the reason this discussion has been going on for years, posing the same limp answers to complex questions, is that it intentionally avoids the essential political component which is at the base of the answer about why one-third of average working Americans do not have enough to retire in comfort, including many who will suffer a serious decrease in their quality-of-life in retirement.

All the Bad Answers

Here are the standard reasons which have become stereotypical in most of the articles which deal with the failure of American workers to prepare for retirement.

  1. Debt payments absorb too much of monthly incomes. Saving is difficult when you have spent money you don’t have.
  2. People don’t understand the importance of retirement planning and think they will continue to work past retirement age at the same income they currently receive.
  3. The federal government will provide for their needs.
  4. Saving for retirement is hopeless. One study , by BankRate Monitor, found 26% of Americans aged 50-64 had not saved anything for retirement and 60% had less than $25,000. Many have abandoned the effort since they believe it is too late to accumulate the needed principal.
  5. The power of consumerism to fulfill immediate wants outweighs the desire to save for future needs. In a consumer society, advertisers constantly work to create needs. Delayed gratification in a consumer-based society is un-American.
  6. Procrastination.

There is truth to each of these reasons.  But the problem is that they all place the burden on individual workers and intentionally neglect much larger political facts about taxpayer resources are squandered on corporate welfare and waste and how individuals have very little input into the political system.

Americans are disenfranchised from the political process for many reasons, but their absence has been replaced by corporate interests which view taxpayers, including their own employees, as subservient and potential victims to their corporate interests.  These interests today are increasingly anti-customer and anti-taxpayer.

Consider the recently publicized debate of major corporations to avoid paying U.S. federal taxes by moving overseas.  This practice, cleverly termed “inversion,” so it is disguised to the majority of Americans, is intentionally designed to shift corporate tax burdens to individual taxpayers, who have no input into the political system to defend their own interests.  This includes those few tools which could enhance the prospects of receiving a secure financial retirement, such as universal health care, promoting job security or raising the minimum wage.

Corporoate tax evasion shifts the burden to individuals.

Corpororate tax evasion shifts the burden to individuals.

Instead corporate interests have hijacked government at the expense of average citizens.  The net effect of this is that the retirement planning message is that individuals have to be strong, tighten their financial belts, save more, work more, cut expenses, create their own portfolios and assume all financial risks in order to retire 30-plus years into the future with the needed amount.  And that “needed amount” is always in flux due to inevitable recessions, financial bubble, inflation, and personal emergencies.

These are all risks which corporations and their lobbyists have successfully avoided by capturing the political system.  Corporate-sponsored waste is legend.  Take the case of cow subsidies, which are part of the huge farm lobby.  Some nine million dairy cows in the U.S. got subsidies of $1.35 billion in 2009, which averages about $20,000 a year for an average herd size of 133 cows, according to the 2010 Congressional Research Service.  This compares to average annual payments off $16,800 a year to human families on welfare, as cited in The Upside of Down by Charles Kenny.

Of course there are many more extreme examples, especially in the defense industry which accounts for  4% of the nation’s GDP, while the U.S, accounts for 41% of the  world’s global military expenditures, according to Kenny.  And the average citizen can do their own research to find sites which list hundreds more examples of corporate-sponsored waste of taxpayer money

What Does Corporate Waste Have To Do With Retirement Planning?

But the obvious question is how does this corporate-enabled waste impact retirement planning?

The politics of retirement are complex, but the best examples are the constant Republican attacks on Social Security, Medicare, Medicaid, the need to privatize retirement, attacks against adopting the fiduciary standard in investments, bank and investment firm bailouts, and protecting large anti-customer financial institutions.

illustration-various-business_shu0084.jpgThere is also the huge issue of how the housing debacle of the 2007 recession, which continues it ill-effects o the economy, has destroyed housing wealth for millions. Housing wealth is a key wealth-building engine and it was derailed in the recession.  Housing appreciation and home equity trump portfolio returns for millions of Americans and that key wealth engine failed to perform as a result of the recession.  This accounts for the financial insecurity of millions, while it hampers job mobility and fosters financial insecurity.  That recession marked the triumph of blatant corporate greed over the entire U.S. financial system.

The net effect of these efforts is that the average worker is going to assume more responsibility for their financial downside, while the corporations demand more guarantees for their financial upside.

If this perspective is adopted by average people planning for retirement, and a few intrepid financial planners who want to engage their clients and fellow citizens in the political-economy of financial planning, than millions of Americans will have a better chance of a more secure financial retirement.

For more about the political economy of financial planning, see How 401(k) Fees Destroy Wealth and What Investors Can Do To Protect Themselves.

 

 

Millenials Want Social Security Benefits to Remain At Current Levels, Pew Research Finds

Written on:July 2, 2014
Comments
are closed
Millenials Want Social Security Benefits to Remain At Current Levels, Pew Research Finds

While Social Security has become a political football in Washington, Americans still regard it as the corner stone of their retirement and are very concerned about it future financial health. A Pew Research Center for the People & the Press report, the Millenials in Adulthood report, found just 14 percent of Americans expect to receive their full benefits, while an earlier Pew study found that among young people this concern…

Read more...

Food Trade Associations Missing Biggest Marketing Opportunity of the Century: The Legalization of Marijuana

Written on:June 29, 2014
Comments
are closed
Food Trade Associations Missing Biggest Marketing Opportunity of the Century: The Legalization of Marijuana

Students of history know that the most powerful idea is one whose time has come.  And that is why some of the nation’s largest food trade associations have entirely missed the boat on an emerging trend which has huge profitability written all over it. The vast opportunity, the equivalent of the “Go West Young Man” slogan which opened the American West, is the current effort to legalize marijuana.  The legalization…

Read more...

The Marijuana Industry Should Become the Newest Gem in Social Investing

Written on:June 23, 2014
Comments
are closed
The Marijuana Industry Should Become the Newest Gem in Social Investing

Social responsible investing (SRI) is defined as the investment process in which “investors weigh the social and financial returns they expect from an investment in different ways. They will often accept lower financial returns in order to generate greater social impact.” Another more upbeat definition is: “SRI is an alternative investment philosophy and strategy seeks to encourage responsible behaviors, including those supporting positive environmental practices, human rights, religious views or what is…

Read more...

Russell Sale Shows Popularity of Indexing and How A Product Stepchild Became the Crown Jewel

Written on:June 12, 2014
Comments
are closed
Russell Sale Shows Popularity of Indexing and How A Product Stepchild Became the Crown Jewel

Russell Investments is on the block for a reported $2.8 billion asking price and is set to be acquired by the London Stock Exchange (LSE). Russell was purchased by Northwestern Mutual for $1.2 billion in 1999 and made an infusion of about $764 million when Russell’s money market fund dipped below the $1 mark in 2008. At that time, Russell also shuttered its hedge fund business. But aside from the…

Read more...

Examining Marco Rubio’s Social Security Reform Proposal

Written on:June 11, 2014
Comments
are closed
Examining  Marco Rubio’s Social Security Reform Proposal

Sen. Marco Rubio, the Florida Republican considering a 2016 presidential run, made headlines this spring by proposing a five-point, Social Security-focused reform plan. The last time Congress made changes to Social Security was 30 years ago, so Rubio’s plan helped to fuel an emotional and complex national debate, although nothing he proposed is viewed as exactly breakthrough. (For the complete article, see Benefits Pro News issue of June 9, 2014.)…

Read more...

How Exotic Financial Strategies Created the Perfect Storm for the 2008 Recession

Written on:June 6, 2014
Comments
are closed
How Exotic Financial Strategies Created the Perfect Storm for the 2008 Recession

It is common knowledge that the 2008 recession was created by a meltdown which affected the housing market worldwide and resulted in the greatest recession and wealth destruction event since the Great Depression of 1929. But what is less known is how exotic financial instruments used by the world’s hedge funds helped create and accelerate this wealth destruction because their strategies, complex financial instruments,  and unquestioning market investors all bought…

Read more...

Capital, Austerity, Alienation and Pensions

Written on:June 2, 2014
Comments
are closed
Capital, Austerity, Alienation and Pensions

“To put it badly, there are two ways to become wealthy: to create wealth or to take it away from others. The former adds to society.  The latter typically subtracts from it, for in the process of taking it away, wealth gets destroyed.”  –Joseph Stiglitz, Nobel Prize Winner in Economics 2001 Pity the middle class. Once the esteemed goal for millions seeking financial security and hopes of greater prosperity, the…

Read more...

Barclays Finally Cited for Being Rogue

Written on:May 23, 2014
Comments
are closed
Barclays Finally Cited for Being Rogue

Today marked a black day for Barclays Plc. as it was cited twice by British financial regulators for manipulating the price of gold on June 28, 2012 and a day after the bank was fined a record £290 million for manipulating the London inter-bank offered rate (LIBOR). Barclays, which dates back to 1896 when it was founded by Quakers (who would probably be turning over in their graves if they could see…

Read more...

Should You Pay for Fund Underperformance?

Written on:May 6, 2014
Comments
are closed
Should You Pay for Fund Underperformance?

 “While 85% of the equity managers studied underperformed the market in nearly all relevant time periods, the amount of fees extracted globally for this and other financial-intermediation services is in the range of $1.5 trillion annually.” –Suzanne Duncan, global head of research for State Street’s Center for Applied Research

Read more...
Breaking News :